China New Loans Trail Forecasts in Sign of Slower Growth

China’s New Loans Trail Forecasts in Sign of Slower Growth
New yuan loans last month were the second-lowest this year, after October’s 505 billion yuan. Photographer: Jerome Favre/Bloomberg

China’s new yuan loans trailed forecasts last month, restraining the pace of recovery in the world’s second-biggest economy after a seven-quarter slowdown.

Banks extended 522.9 billion yuan ($84 billion) of local-currency loans, the People’s Bank of China said today. That compares with a 550 billion yuan median estimate in a Bloomberg News survey of 30 economists and 562.2 billion yuan the same month last year. M2, the broadest measure of money supply, rose 13.9 percent from a year earlier, below the median estimate of 14.1 percent.

Today’s data and November’s weaker-than-expected gains in exports contrast with industrial output and retail sales figures that both exceeded analyst forecasts. Top economic officials may meet this month to map out policies for 2013 including a growth target indicating the pace that the Communist Party’s new leadership, headed by Xi Jinping, will tolerate.

“The data point to a more subdued recovery going forward,” said Dariusz Kowalczyk, senior economist and strategist at Credit Agricole CIB in Hong Kong. The government “seems comfortable” with the pace of economic growth and funding may expand more slowly this quarter, he said.

China’s benchmark stock gauge, the Shanghai Composite Index, fell 0.4 percent at the 11:30 a.m. local-time break. The index was down 5.3 percent this year through yesterday.

Funding Sources

Aggregate financing, an indicator designed to capture other funding sources apart from the bank loans such as trust loans and bond and stock issuance, was 1.14 trillion yuan in November, today’s report showed. That’s the lowest since August and compares with 1.29 trillion yuan in October and 958.1 billion yuan in November 2011.

Trust loans, one component of aggregate financing, more than doubled from a year earlier to 199.5 billion yuan last month. Net bond issuance fell to 181.7 billion yuan and non-financial company stock sales declined to 10.7 billion yuan.

Haitong Securities Co., Everbright Securities Co. and China Merchants Securities Co. were among 10 brokerages that won approval last month to underwrite bond sales on the interbank market as China seeks to expand debt financing.

Separately today, the Finance Ministry said November fiscal spending rose 6.7 percent from a year earlier, equaling October’s pace for the smallest increase since February 2011. Fiscal revenue rose 21.9 percent, the most since August 2011.

New yuan loans last month were the second-lowest this year, after October’s 505 billion yuan, according to central bank data.

Interest Rates

The central bank cut interest rates in June and July and allowed banks to offer bigger discounts on loans to reduce the repayment burden on companies already hurt by rising costs and cooling sales amid the economic slowdown. The PBOC lowered banks’ reserve requirement ratio three times from November 2011 through May, preferring since then to add cash into the financial system using reverse repurchase agreements.

China may have to cut the reserve ratio or interest rates if next year’s economic-growth trend isn’t “too stable,” Caijing magazine reported in its Dec. 10 issue, citing an interview with Xu Nuojin, an official in the central bank’s statistics department.

Industrial output climbed 10.1 percent in November from a year earlier and retail sales growth accelerated to 14.9 percent, while inflation was 2 percent, the statistics bureau said Dec. 9. Customs administration data yesterday showed exports increased 2.9 percent last month from a year earlier and imports were unchanged.

Today’s data showed non-bank credit kept accelerating even as growth in bank credit “slowed a bit in November,” said Yao Wei, China economist at Societe Generale SA in Hong Kong.

“Overall liquidity conditions remain accommodative,” Yao said. “Given the improvement in growth data, the PBOC doesn’t need to do more for the moment.”

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